Food prices will continue to rise as they have not yet increased enough to cover the costs of load-shedding, according to several reports by various listed food companies.
The use of diesel and generators adds 25c per litre of milk produced, said Lancewood CEO Cornel Lodewyks, speaking at the release of food holding company Libstar’s annual results last week. Lancewood is Libstar’s largest operating division.
Lodewyks said this adds between R2.17 and R2.20 in costs to each kilogram of cheese produced. At 20,000 tonnes of cheese a year, the added cost is significant.
Speaking earlier in March during its annual results presentation, fishing group Sea Harvest CEO Felix Ratheb said he believed food prices would keep going up as producers have only added in some of their additional costs and will slowly try to recover rising input expenses.
The company introduces price increases gradually so that consumers do not stop buying its goods.
“Prices are going to increase significantly,” he said. “If people are thinking that food prices are going to be at inflation levels, they are wrong. It’s going to be a lot higher this year. We can see it from our numbers.”
Sea Harvest’s costs in its SA fishing business, which provides hake and fish pieces, rose 26% in the 2022 financial year.“We can never pass on the 26% increase once-off to a consumer. We managed to claw back 13% last year,” the company said. But it will probably add another 13% this year to its fish prices.
Food inflation as measured by Stats SA hit 13.4% in January year on year, driven mainly by increases in the prices of maize and bread, meat and poultry.
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“When you look at it, over two [or] three years, prices have increased substantially. Everyone’s in the same boat. We are facing abnormal inflation and the rand has [got] weaker,” Ratheb said. The weak rand affects imported goods such as black tea, as well as farming equipment and fertiliser.
Earlier in March, Simon Crutchley, the CEO of AVI, which makes Bakers biscuits, Five Roses tea and Willards chips, said the costs of manufacturing during high levels of load-shedding are not yet reflected in what consumers are paying.
“The full brunt of this current predicament is going to play out more significantly than most people anticipate.”
Heaviest burden
Stellenbosch agricultural economics professor Nick Vink said the poorest people in the country carry the heaviest burden and are spending more and more of their income on food.
This echoes what Shoprite CEO Pieter Engelbrecht said in its results earlier in March when he pointed out that the highest inflation was faced by consumers at its Usave branches. This is because the biggest rise in prices was seen in basic commodities such as maize, bread and vegetable oil.
Prices rose 9.4% on average in the six months to January 1 at Shoprite-owned stores, including Checkers, but were higher in products bought by the poor.
“The long and short of it is that the bigger the proportion of income that is spent on food, the harder you are hit by food price inflation,” Vink said, noting that a four-person household has to spend 32.6% of its income on food.
“Things are getting worse. In September 2021, the proportion of income that a household had to spend on food was 29%.”
Vink referred to the Bureau of Food and Agriculture’s (BFAP’s) healthy food basket for a family of four, including two children, which cost R3,415 in January. A low-income family with two child grants would spend over a third of their income on the basket.
This increased 13% or R418 from January 2022 to January 2023, according to data released in March. This means that “half of SA’s population cannot afford a basic healthy food basket”, said Vink.
The BFAP said in a research note that “persistent, increasingly frequent load-shedding continues to add additional costs which could offset the marginally softer agricultural commodity prices”.
According to the BFAP, the prices of maize, ham, apples and onions increased above 30% from January to January with spinach, bread and pork chops up between 20% and 29% year on year. Pasta, potatoes, bacon, milk, cheddar, beetroot, canned baked beans, carrots and pumpkin rose between 10% and 19% in a year.
Frozen fish fingers, stewing meat and frozen chicken were up between 6% to 9% year on year. Rice and offal dropped in price.
“We know that some of the earlier pressures, especially the prices of soya and soya products, have eased a bit, but unfortunately the things we need to produce food including fertilisers, agrochemicals and tractors are all imported, so the collapse of the exchange rate means that food inflation is not destined to decline in the near future,” Vink said.
